b. Marketing campaigns to encourage prudential lending by institutions
One suggestion proposed by this report is a marketing campaign for New Zealand’s financial institutions. This branding initiative would request financial institutions to join this campaign voluntarily. To join such a group, however the lending institution would have to change its lending criteria to suit the RBNZ’s suggested capital liquidity requirements. The RBNZ would then declare such institutions apart of the group and publicise that those that have joined get a ‘RBNZ tick of financial health.’ From this marketing label the public could then infer that the RBNZ considers these institutions have an appropriate lending ratio- implying that they are safe places to invest one’s money. This policy option provides both a voluntary opportunity for financial institutions to join, but also a potentially good incentive to do so. The question remains; however, whether the public will actually demand that their lending institutions actually retain this level of prudence. The experience of the financial recession indeed tells us that consumer demand, not just financial supply drove the increased leverage ratios.